Capital intensity of a trade bundle
Capital per worker-year = capital embodied / worker-years embodied
Leontief's measure. Compute it for the export bundle and for the import-substitute bundle, then compare: for a capital-abundant nation the H-O theorem predicts exports to be the higher figure.
- Capital embodied
- Value of capital in a representative bundle, from the input-output table
- Worker-years embodied
- Labour in the same bundle
Percentage more capital intensive
% = (import-substitute ratio - export ratio) / export ratio x 100
To reproduce Leontief's 30 per cent and 6 per cent figures. Always state which bundle is the base, because reversing it changes the answer.
- Export ratio
- Capital per worker-year in the export bundle, the base
- Import-substitute ratio
- Capital per worker-year in the import-substitute bundle
Narrowing of a factor-price gap
Narrowing % = (gap before - gap after) / gap before x 100
To quantify factor-price equalisation. Both ends of the gap move, so recompute each nation's w and r before differencing.
- Gap
- High-wage nation's w minus low-wage nation's w, or the same for r or w/r